Loading ...The latest attempt to create a cryptocurrency pegged to the U.S. dollar, or “stablecoin,” combines 21st-century technology with an invention from the Great Depression.
Announced Tuesday, a startup called Stronghold is launching USD Anchor, which will run on the rails of the Stellar blockchain and use its consensus mechanism to verify transactions. The token will be backed one-for-one with U.S. dollars held at a Nevada-charted trust company called Prime Trust, which in turn will deposit the cash at banks insured by the Federal Deposit Insurance Corp.
New York City-based Signature Bank was originally expected to be providing the federally insured backing of the stable coin, but it appears to have backed out of the partnership at the eleventh hour, according to IBM.
IBM is partnering on the initiative with Stronghold, and said it will explore various use cases for the token with its financial institution clients.
“What we really want to do is enable all sorts of digital transactional networks to settle their transactions with digital fiat currency on the same blockchain networks,” Jesse Lund, IBM’s head of blockchain services for financial institutions, told CoinDesk.
Stronghold acts as an “anchor,” or on- and off-ramp, to the Stellar network. The startup will issue the digital asset, which represents a claim on U.S. dollars deposited with Prime Trust and ultimately insured by the FDIC, the U.S. agency created in 1933 whose sticker on the doors of bank branches has long reassured Americans their money is safe.
“The process for seamlessly managing and trading assets of any form from digital to traditional currencies, needs to evolve,” said Stronghold’s co-founder and CTO, Sean Bennett, in a release. “Asset-backed tokens can provide seamless access to all currencies, improving the global movement of money.”
As such, the project represents one of several recent efforts to tokenize fiat currency in order to make transactions as fast and frictionless as crypto but without the volatility. The first use cases IBM will pursues will be around cross-border payments in the form of remittances and small-scale foreign exchange transactions.
The stablecoin is now available to institutional clients and IBM aims to “put it to use as quickly as possible,” Lund told CoinDesk, adding,